Forex Options Trading A Quick Overview
By Timothy Stevens
If you want to get into forex options trading, here is a brief overview of the process you will have to follow. But before proceeding it is assumed that you are already familiar with foreign currency trading. If you're not, then you should consider taking up a forex trading course before venturing into the complex world of options.
First you have to select which currency pair you are interested in trading. The most commonly traded currency pairs include: Euro (EUR)/US dollar (USD); USD/Japanese yen (JPY); and the British pound (GBP)/USD. Then you have to decide if you're taking out a call or a put option. A put option gives you the right but not the obligation to buy a certain amount of currency at a given price and on or before a specified date, while a call option allows you to sell the currency.
You then take out an options contract with the broker you use in your forex options trading, assuming he allows options trading. If not then you may have to find another broker, preferably one certified by the National Futures Association. You can either go with a traditional option in which you specify the strike price (the price the currency has to reach before you can exercise the option) and set the expiration date, or with a SPOT option in which you specify a target strike price and an expiration date. Pay your broker the premium for the option; if you choose not to exercise the option this premium is the extent of your loss.
In the traditional option you can make a profit if the exchange rate moves in your favor, while in a SPOT option your trading account is automatically credited if the strike price is reached before the contract's expiration date.
Whichever type of option you've chosen, forex options trading will allow you to make a profit with minimal risk - provided you know what you're doing.
Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com - He has helped hundreds of people on Trading Forex with Options.
He has recently developed a free e-course showing you a step by step process for starting your Forex Trading easier. To learn how to start Forex Trading with Options without wasting your time and losing more money, visit http://www.NonDirectionTrading.com/members/FreeReport.htm
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